Financing Infrastructure for the Urban Future

Julie Monaco

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Global Head, Public Sector Group, Citi

One of the most pressing issues around the world is the immense shortage of much-needed infrastructure. Unprecedented urbanization is driving demand for infrastructure in cities globally – whether it is transport, water and sewer, digital or social.

As the world’s urban population swells, infrastructure is critical to creating economic development, attracting talent, making cities more livable and helping them transition to a smarter, more sustainable future. Yet not enough infrastructure projects are moving forward to meet the growing need of urban residents.

Infrastructure is Top Priority for Mayors

Government officials at the local and regional levels are seeking ways to unlock capital to fund infrastructure transactions, but often times have been unable to move forward with critical projects due to a variety of constraints.

A recent survey that Citi commissioned with the Boston University Initiative on Cities focused on top challenges facing U.S. mayors in cities of all sizes. Nearly half of the 89 mayors surveyed said that aging and underfunded infrastructure is their biggest challenge, with mass transit, roads and water topping the list of priorities. Yet they lack the resources and support from state and federal governments to implement these projects at the city scale.

The Role of the Private Sector

How can necessary urban infrastructure projects move forward? Institutional investors, governments and financial institutions are all actors in this very complex theater that differs from region-to-region and country-to-country. At the same time, we believe the private sector is well-suited to address the financing gap by leveraging the capital markets to mobilize the funding required for infrastructure investment.

Investment in infrastructure is mission critical in order to create sustainable economic development and boost social progress. Many companies are doing their part to support such efforts. Take, for example, the financing of the streetlight project in Detroit, MI. At one point, 40 percent of the streetlights in Detroit did not work. During this time, the unemployment rate in the city was at an all-time high and the auto industry was in the midst of a virtual collapse. The Public Lighting Authority of Detroit devised a way to re-illuminate the city, but finding a bank to finance the project was challenging.

Citi stepped up and committed $60 million, which encouraged other early investors, and then helped issue bonds to raise the remaining funds to install thousands of LED streetlights, improving the quality of life for Detroit residents. Today, more than 30,000 lights have been fixed and repairs are underway for the remainder of the system.

Collaboration and Sharing Best Practices

Spurring urban infrastructure projects will take innovative approaches and collaboration across the public and private sectors. Convenings such as the recent Innovations in Urban Infrastructure Financing event held at Citi’s global headquarters in New York help foster the sharing of best practices and ideas by leaders from across sectors. Many concrete examples of innovate approaches were shared during the event, from crowdfunding campaigns for a pedestrian bridge in Rotterdamand the LowLine underground park in New York to discussions on the responsibility of local and federal governments to address water pollution. The event also highlighted the Handbook on Urban Infrastructure Finance, a new resource designed to provide actionable research to urban planners in cities around the world.

As the world’s cities continue to grow – with developing and new cities growing at the fastest rate – urban infrastructure projects are key to ensuring cities can maintain and enhance quality-of-life, as well as remain competitive. No single entity can do it alone. Only through collaboration and partnerships will the world’s cities be in position to implement the vital infrastructure projects they need to manage their growth and thrive.

Julie Monaco is the Global Head of Citi’s Public Sector Group in the Corporate and Investment Banking division of Citi’s Institutional Clients Group. Julie was named, in 2015, to the American Banker’s list of “25 Most Powerful Women in Banking and Finance” for the sixth year.